Never Take Out a Car Loan Again! (in 5 Simple Steps).

It’s a well known “secret” that the average American cannot afford a new car . That article focuses mostly on the fact that people borrow way more than they should when buying a new car. But this post is about buying a car outright – with no financing. Very few people can afford to buy a new car without taking out a loan, but they would be better off if they could only figure out how to break the cycle of new car – new loan.

Matt Jabs shared his ideas on How to STOP Financing Your Vehicles at DebtFreeAdventure.com and it got me fired up on the topic again.

Regular readers already know that I learned a lot from my expensive mistake buying a car when I was younger. Mostly what I learned was how not to get entirely ripped off in the process. I thought at the time that it was used car salesmen that were out to rob you blind, but I learned that the new car salesmen can take a lot more without you ever really being aware of it – until it’s too late.

So, I learned what NOT to do when buying a new car. Years later, when my wife and I were expecting our 3rd baby and had to upsize our family vehicle, I put those lessons to work and shared a few more lessons I learned when buying a car.

But, if you click through to that last link you’ll notice while I didn’t get taken for a ride, I still had to take out a loan for the new car.

The truth of the matter is that getting off the financing treadmill is just not that easy.

Here are Matt’s 5 tips to stop financing your vehicles:

1. Stop thinking you have to borrow money to buy a car.
2. Aggressively pay down existing auto loans.
3. Continue saving after the loan is paid off.
4. Buy used.
5. Save for repairs and maintenance.

To be honest, my wife and I did #2 and 3 above before we upsized our car… we just didn’t have enough time between paying off the previous loan and buying the new car, so we had to finance a good chunk of it. We also bought used. If it was just my car, I probably would have bought an even older car and financed less, but since it’s the family car and I would hate for my wife to break down in the middle of nowhere with 3 small children, we settled for a 2 year old vehicle. Most of the depreciation was over at that point also.

So, we’ve made progress in the process, but we’re not there yet. Hey, I said they were simple steps, not easy.

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• What Do People Spend Their Money On?
• The Typical American Family Can’t Afford The Typical New Car!
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Best High Yield Savings Account Rates Of 2011.

Just as there are buyer’s markets and sellers markets in real estate, so there are saver’s markets and spender’s markets in banking. It’s by design, although the Federal Reserve may prefer to look at low interest rates as spurring investment rather than spending, but the truth of the matter is that low interest rates typical spur more debt than more investing.

Alas, such is the state of savings rates today – pitiful!

But just because rates are low, doesn’t mean there aren’t better choices than the 0.01% local banks seem to give. Here’s a list of the highest yielding savings accounts as of August, 2011 (in order of rate, highest to lowest):

• Everbank offers high-yield money market account with an APY of 1.01%. The minimum deposit is $1,500 and there’s an $8.95 per month fee whenever your balance is less than $5,000 and a $10 transaction fee for every transaction over the monthly limit. (click the link above for details)
• Incredible Bank offers a checking account with 1.21% APY with a $1,000 minimum deposit to open. There’s a list of additional fees though.
• SFGI Direct offers a 1.11% APY savings account with a $500 minimum to open.
• Discover Bank has a 1.15% APY online savings account with a $500 minimum to open. click here for fees
• CNB Bank Direct offers 1.15% APY on its high-yield savings account with a $1 minimum balance. No mention of fees
• Sallie Mae Bank has a 1.10% APY high-yield savings account with an additional 10% rewards match on Upromise accounts.
• SmartyPig is offering 1.10% APY on its savings account.
• Capital One has an online savings account that pays 1.10% APY on balances over $1000. If you have a Capital One credit card, you can earn a 10% bonus on your interest earned.
• Nationwide Bank is paying 0.50% APY with a $300 minimum balance. (click the link above for fees)
• OneWest Bank has a Green Savings account that currently pays 1.00% APY, with no minimum.
• iGOBanking is providing a 1.01% APY with no fees and no minimums.
• One of my favorites, ING Direct is paying 1.00% APY with no minimums on its Orange Savings account Note: If you’re interested in ING, you can get an extra $25 when you open with one of these referral codes (email me if they have expired, and I’ll send you a fresh one)
• American Express offers a 1.00% APY high-yield savings account with no fees and no minimums.
• Dollar Savings Direct has an APY of 0.90% with no fees and a $1000 minimum balance.
• FNBO Direct has an 0.85% APY online savings account with a $1 minimum deposit.
• The HSBC online savings account currently provides an 0.80% APY. There are no fees and no minimums, but you need at least $1 to open the account. HSBC is my other high yield savings account (ING is the 1st), and I’ve had no complaints.
• Emigrant Direct also offers 0.80% APY with no fees and no minimums.

You’ll likely notice a trend as you go down the list – as the yield drops, so do the fees and additional requirements. Also, many have implemented new fees and requirements due to the Frank-Dodd financial regulation passed by Congress after the recent financial meltdown. You didn’t think the banks were going to pay those new regulation fees out of pocket, did you?

Related Posts:

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• ING Direct Orange Savings Referral Links.

Games to Teach Children About Money.

It’s never too early to start learning about money. In fact, the earlier parents begin to teach children about money and money management, the better off everyone would be. Children who learn proper money management skills early in life are less likely to end up as boomerang kids, living in their parent’s basement at 27 years old.

Here are some ideas for games to teach young children about money and basic money skills. best of all, they’re free, interactive and imaginative – no computers, television or board games here!

Let’s get started…

Money Games for Toddlers

Children are naturally inquisitive. Just because they are too young to learn simple math and grasp the beauty of compounding interest doesn’t mean they can’t start to learn about money. Begin with the basics.

Grab a penny, a nickel, a dime and a quarter. Teach your toddler the names of each coin. Engage him in tactile interaction with the coins – get a small piece of Tupperware, or a box and practice taking the coins out and putting them back in. Toddlers LOVE this kind of repetitive activity.

The mind of a toddler is like a sponge. You don’t need to force feed them the names and quiz them, flashcard style. Simply holding up a penny and saying, “Penny” before placing it in the container is often time enough to create that bond between the name of the item and the item itself.

Start small with 1 or 2 coins and work your way up. Ask your toddler to grab the penny or nickel. Make a big deal when he gets it right. It may not seem like much, but it’ll be a fun game for him and the positive reinforcement will encourage him to new heights.

Image by Timeout Kids.

Games for Preschoolers

Once your child has progressed beyond the name and coin recognition stage, and has moved into coloring, drawing and general crayon work, start adding more detail to the coin game. Start teaching the value of the coins, replacing the names with the monetary equivalent. For example, instead of saying “where’s the nickel?” you can say, “Where’s the 5 cent piece” or “Can you find 5 cents?”

While few preschoolers can handle the math required for making change for a dollar, you can start them on the path with simple counting games. Using pennies, you can introduce your child to the concept that 5 pennies equal 1 nickel, and so forth. It’s little more than counting pennies, but it’s a beginning and it’s important.

If your child is a math star, then by all means introduce counting by fives and tens (i.e. nickels and dimes). The point is to start small and work up. You’re not grooming your progeny for MENSA here, but rather laying the ground work for interest in learning and a solid financial background later in life.

Draw a circle for each coin, label it with its cent value and have your child color the circles in with whatever colors they want. Make sure each circle is roughly the right size in relation to the other circles (i.e. the dime should be smaller than the nickel..).

Ask your child to match the coin to the correct circle, using verbal cues. For example: ask, “where does the penny go?”, without pointing.

This will force the child to recognize the penny out of the possible coins laid out before him, and also challenge him to match the coin with the picture he colored.

Games for 5-8 year olds

Play shopkeeper. My middle child is 5 and she loves to play store owner. She takes her stuffed animal collection and spreads it all over the room, and pretends it’s her pet shop.

The rest of the family then takes turns “buying” a pet. It’s great imaginative play, and it provides the opportunity for learning about exchanging money for goods, and making change. It increases money awareness and math skills and best of all – it’s interactive. There is no television or computer to lean on mentally! It’s pure imagination and role play, which then lends itself to discussing and learning about all sorts of things in life – trust me!

This kind of game can be adapted for various levels and interests. Maybe your child isn’t into pets. Maybe it’s superhero action figures, grocery store play food or race cars. Maybe it’s a service, and not a product based store. You can play restaurant – kids love play food and pretend cooking.

You can also adjust the complexity of math and money management skills to the age level. For example, simple whole numbers for the 5 year age set :

Owner: “That pet is $4. ”

Shopper: “Ok, great. Here’s a $5 bill.”

Owner: “Thank you. Here’s a dollar for your change.”

Or for the later ages:

Wait person: “Thank you for dining at Half-Pint Cafe. Here’s your check.” (child provides hand-written lunch check for $12.95)

Diner: “Lunch was wonderful. Thank you.” (parent provides $15 )

Wait person: “Here’s $2.05 change. Please come again.”

Diner: “Oh I will, you can be sure of it!” (parent places $2 on the table for a tip).

So what just happened here? The child learned to make proper change, and practiced his writing skills and manners.

Perhaps the child even learned what a “tip” was. There’s a world of possibilities out there. Mix it up and experiment. What happens when the diner doesn’t give enough money as payment? What happens when you’re the wait person, your child is the diner and you give incorrect change back. See if your child notices, and role play consequences. This is a great opportunity to teach lessons about what’s right and what’s wrong regarding money and how we use it.

Some final thoughts

The earlier you start, the easier it will be to engage your child.

Include the whole family – you might be surprised at what siblings (older and younger) will come up with!

Older siblings can sometimes have an easier time of joining in if they are engaged in the teaching aspect. Get them involved in helping to teach the younger ones and they may learn a thing or two also – or come up with a new variation that may teach something you didn’t think needed to be taught.

Content in this post was inspired by Money Doesn’t Grow On Trees: A Parent’s Guide to Raising Financially Responsible Children

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How to Waste Your Money in 15 Easy Steps.

I came across a Yahoo! finance post the other day that highlighted 25 different money leaks. Some were OK, some were pretty lame. I decided to pick some of the better ones and add some of my own for this list. These are 15 items I think most people probably waste at least a little bit on now and then. Mostly this list should get you thinking about were and how you waste money regularly, so that you can stop and pocket that money instead. This list is by no means meant to be one of items people should never spend money on. Rather, it is a collection of things we often spend on and may have never considered a cheaper alternative.

Here we go… 15 money wasting leaks.

1. Credit card debt. Carrying a balance – however small – in an excellent way to leak cash from what could otherwise be your savings. Even a modest credit card balance will cost you hundreds of dollars a year at a rate of 10% or more. Do what you can to Get out of credit card debt.
2. Excessive car maintenance. Premium gas, and unnecessary oil changes are just a couple of the car maintenance costs you can save money on .
3. Unhealthy habits. Cigarettes are costly, and spending the evening at the bar adds up quickly. You’ll not only save costs, but also save your health by cutting back if not quitting.
4. More cell phone than you need. Many people find themselves locked into a monthly cell phone contract costing the thousands. That’s all well and good if you really need those features and use the service, but many people simply do not. I was one of these people, and gave up my Verizon bill for a pay as you go Tracfone years ago and have been pocketing the savings ever since.
5. Buying name-brand instead of generic. Whether it’s clothes or groceries, many name brand products are identical to the generic, but you pay a lot more.
6. Not asking for a discount or cheaper alternative. Hey, it never hurts to ask. Right?
7. Not buying beverages in bulk. Soda is cheaper when you buy a 2-liter bottle than a 20oz. bottle. The same is true for many drinks. And snack food to come to that. If you like some chips with your brown-bag lunch, why not by the big bag and bring a few every day in a sandwich bag. You do bring your lunch to work instead of buying, don’t you?
8. Paying for something that’s ‘Free’. Why spend money when you don’t have to? You can get software for free and your credit report for free among other things, and yet millions continue to pay . Don’t be one of them.
9. Getting a tax refund. Loaning your hard earned money to the government for nothing in return is one of the most senseless money mistakes going. Yet every year we see stories about the millions who do, and what they’re going to do with their “extra money”. Do yourself and the country a favor – put that money in a saving account instead. You’ll earn interest on it and you’ll still have the money come tax time next year.
10. Stashing your savings in a low (no) interest checking account. While we’re on the topic of saving money, there are dozens of high yield savings accounts out there, pick one. I recommend ING and HSBC Direct , but there are many other options to choose from.
11. Paying late fees. This is just a result of poor planning. I know – I’ve done it! Get whatever system works for you in place so you don’t do it again. Either use personal finance software, or a cheap calendar to write due dates on, or get a planner. For Pete’s sake – do something!
12. Paying ATM fees. This is also because you didn’t think ahead. There is no other reason to pay ATM fees other than poor planning, plain and simple.
13. Shopping without a list. Be it grocery shopping, or clothes shopping. There’s a reason retailers love you to window shop – you spend more than you would have with a defined list of items. They love it because it’s money in their pocket. Keep money in your pocket instead. Use a list.
14. Paying for things you don’t use. Sometimes it’s poor or no planning that leads you to that splurge on that spur of the moment purchase. Other times it’s product packaging that forces you to buy more than you need. Case in point: Cable Television. Well, I cut my bill by $40 a month, and so can you! By the way, this is another example of “just asking” for the discount too, albeit there was a fair amount of negotiation with the asking.
15. Buying a new car, instead of a used one. I know a lot of people argue that a new car is worth the money for the peace of mind that comes from being free from repairs, but take it from me - buying a new car can be costly experience!

Feel free to leave any quick money savers you may have in the comment section!

Related Posts:

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• When Saving Money Can Cost You.